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ACCA Strategic Professional · Advanced Taxation (UK) · Income tax: income from self-employment

Bright Ltd, a trading company with a 12-month accounting period, buys a new main pool machine for £200,000 and has already fully used its annual investment allowance on other expenditure. Which statement about the allowance available on the machine is correct?

The machine qualifies for a 100% first year allowance. Companies get enhanced capital allowances on new main pool plant, so even though the annual investment allowance is used up, the full £200,000 can be deducted in the period of purchase.

  1. AIt qualifies for a 100% first year allowance, as the company is a company and the machine is main pool plantCorrect
  2. BIt qualifies only for an 18% writing down allowance, as AIA has been used up
  3. CIt qualifies for a 50% first year allowance
  4. DIt qualifies for a 3% straight line allowance

Explanation

Companies can claim enhanced capital allowances: a 100% first year allowance on main pool expenditure, even when the AIA is exhausted. The 18% option ignores the full expensing for companies. 50% applies to special rate pool items and 3% is the SBA rate.

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